Oil & Gas - Financial Restructuring of Premier Oil PLC

Premier Oil PLC (2017)

Allen & Overy advised the co-ordinating committee of banks on the restructuring of their USD2.5bn revolving credit facility and combined GBP100 million and USD150 million term loan to Premier Oil, a UK based international oil and gas exploration and production company. The restructuring, comprising total indebtedness of $3.5bn, was implemented pursuant to two Scottish schemes of arrangement and a series of interconditional consensual arrangements.

Premier Oil, a UK listed plc, is one of several companies in the Oil & Gas sector that has had to evaluate its financing options as it continues to adapt to the impact of the prolonged low oil price environment. In 2016, against the background of pending financial covenant defaults, Premier Oil sought to restructure its financial indebtedness resulting in the largest and most complex restructuring of a North Sea oil company to date. The transaction’s complex nature arose from the significant mix of debt involved, which included listed retail and convertible bonds, Schuldschein loans, a revolving credit facility, term loans, private placement notes and swaps and was further complicated because, with the exception of the convertible bonds, which were structurally subordinated, all of the debt was pari passu and unsecured.

Under the debt restructuring, debt maturities were extended to 2021 in return for improved economics, a comprehensive security and guarantee package and tighter covenant controls over the group’s operations. Creditors also received warrants (or a synthetic equivalent) in Premier Oil. In addition, undrawn RCF commitments and commitments drawn after 15 March 2016 were afforded priority ranking. Importantly, the extension of the RCF provided Premier Oil with continued access to its letter of credit facility, which is essential for the company to continue to meet its decommissioning security obligations.

Implementation for the majority of the indebtedness, including the revolving credit facility, private placement notes, term loans and retail bonds was effected through two interconditional Scottish schemes of arrangement. German law Schuldschein loans were converted into a syndicated English facility outside of the scheme process. The convertible bonds were extended to 2022 pursuant to a consent solicitation process.

Trevor Borthwick (Partner, Global Corporate Lending Group) commented: “As oil and gas companies adjust to the altered commodities pricing landscape, debt restructuring is likely to be an option many have to consider. Here the mix of debt involved, the complexity of Premier’s business and the intricacies of oilfield regulation – particularly in the North Sea – required us to mobilise a large cross-practice international team.”

THE A&O TEAM

The London restructuring team was led by partner Katrina Buckley, assisted by senior associate Nick Lister.

The London banking team was led by partner Trevor Borthwick, assisted by senior associates Angela Lai and Jane Glancy, and counsel Diane Richardson.

The London corporate team, advising on the equity aspects of the transaction, was led by partner Stephen Mathews, assisted by senior associate Catherine Jones.

The London capital marketsteam was led by partner Jamie Durham, assisted by senior associate Cieren Leigh.

A separate A&O team led by partner David Bentonand senior associate Neil Patel advised certain hedge counterparties on the restructuring of the swaps. Partner Morgan Krone also led a team advising GLAS as agent.

Tax advice was provided by partner Lydia Challen and derivative s advice by partner Tom Roberts.

Further support was provided by Allen & Overy lawyers in offices including Amsterdam, Hanoi, Ho Chi Minh, Jakarta, Frankfurt, New York and Singapore. The Legal Services Centre in Belfast and Project Management Office in London also played key roles.